Securities Trading Simulation

1. A method of simulating a trade of a security at volume V over a time interval T, the method comprising: selecting a piece of market data from a pool of market data, wherein each piece of market data in the pool reflects one or more actual or potential transactions of a volume of the security at a price during the time interval T; adding, using a computing system, some or all of the volume reflected in the piece of selected market data to an accumulated volume not to exceed the volume V; comparing, using the computing system, the accumulated volume with the volume V, and if the accumulated volume is less than the volume V, then repeating the steps of selecting a piece of data and adding, using the computing system, to the accumulated volume until the accumulated volume equals the volume V; and once the accumulated volume equals the volume V, calculating a simulated trade price that represents the price of the accumulated volume.

2. The method of claim 1 further comprising: repeating the steps of selecting a piece of market data, adding, using the computing system, to the accumulated volume, comparing, using the computing system, the accumulated volume with the volume V, and calculating a simulated trade price until a stopping condition is met.

3. The method of claim 2 wherein the stopping condition is met when a predetermined number of simulated trade prices have been calculated.

4. The method of claim 2 wherein selecting, using the computing system, a piece of market data from a pool of market data comprises randomly selecting a piece of market data from a pool of market data.

5. The method of claim 4 wherein randomly selecting a piece of market data from a pool of market data comprises randomly selecting a piece of market data from a pool such that each piece of market data has the same probability of being selected.

6. The method of claim 2 further comprising: forming an estimated trade price distribution using the predetermined number of simulated trade prices.

7. The method of claim 6 further comprising: comparing an actual securities trade price to the estimated trade price distribution; and determining a measure of performance of an actual securities trade in comparison to the estimated trade price distribution.

8. The method of claim 7 wherein the measure of performance is the probability that a simulated trade price on the estimated trade price distribution would be greater than the actual securities trade price.

9. The method of claim 6 further comprising: determining the opportunity of the estimated trade price distribution.

10. The method of claim 6 further comprising: integrating a payoff of a derivative against a estimated trade price distribution generated by a trading simulator; and generating a measure of the fair value of a derivative.

11. The method of claim 1 wherein each piece of market data in the pool of pieces is a quote.

12. The method of claim 1 wherein each piece of market data in the pool of pieces of market data is a tick.

13. The method of claim 1 wherein each piece of market data in the pool represents an aggregate of ticks recorded during a fixed-time interval.

14. The method of claim 1 wherein the time interval T spans more than one trading day.

15. The method of claim 1 wherein the security comprises one of the following: a stock, a bond, a derivative, commodity or foreign exchange rates.

16. The method of claim 1 wherein adding some or all of the volume reflected in the piece of selected market data to an accumulated volume comprises: randomly selecting, using the computing system, a fractional value F; and adding fractional value F, using the computing system, of the volume reflected in the piece of selected market data to an accumulated volume.

17. The method of claim 16 wherein the fractional value F is between 0 and 1.

18. The method of claim 16 wherein the fractional value F is no less than a minimum fractional value.

19. The method of claim 18 wherein the minimum fractional value is dependent on ratio of the volume V of the simulated trade to the total volume available over the trading interval T.

20. The method of claim 1 further comprising: after selecting a piece of market data from the pool of market data, removing the selected piece of market data from the pool.

21. The method of claim 20 further comprising: after each piece of market data is removed from the pool, determining whether the pool of market data contains any pieces of market data, and if the pool of market data does not contain any pieces of market data, then performing the steps of: returning all removed pieces of market data to the pool; setting the accumulated volume to zero; and repeating the steps of selecting a piece of market data, adding, using the computing system, to the accumulated volume, comparing, using the computing system, the accumulated volume with the desired volume, and calculating a simulated trade price until a predetermined number of simulated trade prices have been recorded.

22. The method of claim 1 further comprising: after each piece of market data is selected, computing, using the computing system, an accumulated volume weighted average price based on the accumulated volume and the price reflected in each piece of randomly selected market data.

23. The method of claim 1 wherein the simulated trade price is expressed as the volume weighted average price per share of the accumulated volume.

24. The method of claim 1 wherein the simulated price is expressed as the total price for the accumulated volume.

25. The method of claim 1 wherein adding some or all of the volume reflected in the piece of selected market data to an accumulated volume not to exceed the volume V comprises: selecting some or all of the volume reflected in the piece of randomly selected market data; determining, using the computing system, if the accumulated volume with the selected volume would exceed the volume V and if so, then reducing the amount of selected volume to an amount that would cause the accumulated volume to equal the volume V.

26. A method of simulating a securities trade, the method comprising: receiving input identifying a security on which to perform a simulated trade, a desired volume of the simulated trade, and a time period over which the simulated trade is to occur; creating a pool of pieces of market data, wherein each piece of market data includes information identifying the volume of the security represented by the piece of market data and information identifying the price of the piece of market data; selecting a piece of market data from the pool; recording, using a computing system, an accumulated volume based on the information identifying the volume of the security represented by the selected piece of market data, wherein the recorded accumulated volume is not greater than the desired volume; comparing, using the computing system, the accumulated volume with the desired volume of the trade, and if the accumulated volume is less than the desired volume, then repeating the steps of selecting a piece of data and recording an accumulated volume until the accumulated volume equals the desired volume, once the accumulated volume equals the desired volume, calculating a simulated trade price that is based on the information identifying the price at which the piece of market data was traded for each piece of randomly-selected market data.

27. The method of claim 26 further comprising: repeating the steps of selecting a piece of market data, recording, using the computing system, an accumulated volume, comparing, using the computing system, the accumulated volume with the desired volume, and calculating a simulated trade price until a predetermined condition has been satisfied.

28. The method of claim 26 wherein creating a pool of pieces of market data comprises: forming a pool of pieces of market data from pieces of market data that reflect actual or potential transactions occurring between a first time and a second time; continuously updating the pool of pieces of market data with pieces of market data that reflect actual or potential transactions occurring after the second time.

29. The method of claim 26 wherein selecting a piece of market data from the pool comprises randomly selecting, using the computing system, a piece of market data from the pool.

30. The method of claim 26 wherein the predetermined condition is a predetermined number of simulated trades.

31. The method of claim 26 wherein each piece of market data in the pool represents an aggregate of ticks recorded during a fixed-time interval.

32. The method of claim 26 wherein recording an accumulated volume based on the information identifying the volume of the security represented by the selected piece of market data comprises: adding, using the computing system, a random portion of volume of the security represented by each selected piece of market data to the accumulated volume; and after adding a random portion of the volume to the accumulated volume, determining, using the computing system, if the accumulated volume is greater than the desired volume, and if so, then reducing the random portion of the volume to an amount that causes the accumulated volume to equal the desired volume.

33. The method of claim 32 wherein the random portion is between 0 and 1.

34. The method of claim 32 wherein the random portion is no less than a minimum fractional value.

35. The method of claim 26 further comprising: after selecting a piece of market data from the pool of market data, removing the selected piece of market data from the pool.

36. The method of claim 35 further comprising: after each piece of market data is removed from the pool, determining whether the pool of market data contains any pieces of market data, and if the pool of market data does not contain any pieces of market data, then performing the steps of: returning all removed pieces of market data to the pool; setting the accumulated volume to zero; and repeating the steps of selecting a piece of market data, recording, using the computing system, an accumulated volume, comparing, using the computing system, the accumulated volume with the desired volume, and calculating a simulated trade price until a predetermined condition has been satisfied.

37. The method of claim 26 wherein the simulated price is expressed as the volume weighted average per share of the accumulated volume.

38. The method of claim 26 wherein creating a pool of pieces of market data comprises: accessing one or more databases containing ticks that represent actual transactions of a plurality of security; identifying the ticks that represent actual transactions of the identified security; forming a pool of pieces of market data from the identified ticks.

39. The method of claim 38 wherein forming a pool of pieces of market data from the identified ticks comprises: filtering out ticks that represent a transaction below a predetermined threshold value.

40. The method of claim 38 wherein forming a pool of pieces of market data from the identified ticks comprises: filtering out ticks that represent a transaction above a predetermined threshold value.

41. The method of claim 38 wherein forming a pool of pieces of market data from the identified ticks comprises: dividing the time interval over which the simulated trade is to occur into a series of bins, each bin representing a fixed period of time within the time interval; and aggregating, using the computing system, the ticks that occurred within the time period of each bin.

42. A computer program product residing on a computer readable medium for simulating a trade of a security at volume V over a time interval T comprises instructions to cause a computer to: select a piece of market data from a pool of market data, wherein each piece of market data in the pool reflects one or more actual transactions of a volume of the security at a price during the time interval T; add some or all of the volume reflected in the piece of randomly selected market data to an accumulated volume not to exceed the volume V; compare the accumulated volume with the volume V of the trade, and if the accumulated volume is less than the volume V, then repeating the steps of selecting a piece of data and adding to the accumulated volume until the accumulated volume equals the desired volume; and once the accumulated volume equals the desired volume, calculate a simulated trade price that represents the price of the accumulated volume.

43. The computer program product of claim 42 further comprises instructions to cause a computer to: repeat the steps of selecting a piece of market data, adding to the accumulated volume, comparing the accumulated volume with the desired volume, and calculating a simulated trade price until a predetermined condition has been met.

44. The computer program product of claim 43 wherein the predetermined condition occurs once a predetermined number of simulated trade prices have been calculated.

45. The computer program product of claim 42 further comprising instructions to: randomly select a fractional value F; and add fractional value F of the volume reflected in the piece of randomly selected market data to an accumulated volume.

46. The computer program product of claim 42 further comprising instruction to: form an estimated trade price distribution using a plurality of the calculated simulated trade prices.

47. The computer program product of claim 46 further comprising instructions to: compare an actual securities trade price to the estimated trade price distribution; and determine a measure of performance of an actual securities trade in comparison to the estimated trade price distribution.

48. The computer program product of claim 47 further comprising instructions to: determine the opportunity of the estimated trade price distribution.